Navigating employment termination in Germany requires a thorough understanding of its complex legal framework, which is designed to provide significant protection to employees. Unlike many other jurisdictions, German law imposes strict requirements on employers regarding the grounds for dismissal, notice periods, and procedural steps. Failing to adhere to these regulations can lead to costly legal challenges and potential reinstatement of the employee.
Employers must be diligent in ensuring that any termination is legally sound, properly documented, and executed according to the specific circumstances of the employment relationship and the applicable laws, including the Termination Protection Act (Kündigungsschutzgesetz - KSchG) and relevant collective bargaining agreements. Understanding the nuances of notice periods, potential severance obligations, and valid grounds for dismissal is crucial for compliance and minimizing risk.
Notice Period Requirements
The required notice period for terminating an employment contract in Germany depends primarily on the employee's length of service with the company. Statutory minimum notice periods are set out in Section 622 of the German Civil Code (Bürgerliches Gesetzbuch - BGB). These periods apply unless a longer notice period is agreed upon in the individual employment contract or a collective bargaining agreement (Tarifvertrag). Collective agreements can sometimes stipulate shorter notice periods, but generally, they provide for longer ones or specific rules for certain industries or employee groups.
During a mutually agreed-upon probationary period, which can last up to six months, the statutory notice period is typically two weeks, effective from any day. After the probationary period, the basic notice period for the employer is four weeks to the 15th or the end of a calendar month. This period increases with the employee's tenure.
Here is a table outlining the standard statutory minimum notice periods for employers based on the employee's length of service:
| Length of Service | Notice Period (Effective Date) |
|---|---|
| Up to 6 months | 2 weeks (during probation) |
| 7 months - 2 years | 4 weeks (to the 15th or month-end) |
| 2 years | 1 month (to the end of a calendar month) |
| 5 years | 2 months (to the end of a calendar month) |
| 8 years | 3 months (to the end of a calendar month) |
| 10 years | 4 months (to the end of a calendar month) |
| 12 years | 5 months (to the end of a calendar month) |
| 15 years | 6 months (to the end of a calendar month) |
| 20 years | 7 months (to the end of a calendar month) |
Notice periods for employees are generally four weeks to the 15th or the end of a calendar month, regardless of tenure, unless longer periods are agreed upon or stipulated in collective agreements. If the employer's notice period is longer due to tenure, the employee's notice period cannot be shorter than the employer's.
Severance Pay
In Germany, there is generally no statutory right to severance pay (Abfindung) upon ordinary termination of employment. Severance is not automatically mandated by law but is frequently paid in practice. The primary situations where severance is typically involved are:
- Settlement of a Termination Protection Lawsuit: The most common scenario is when an employee files a lawsuit challenging the validity of a dismissal under the Termination Protection Act. To avoid the uncertainty and cost of litigation, employers often offer a severance payment as part of a settlement agreement (Vergleich) reached in court or out of court.
- Social Plan (Sozialplan): In cases of significant operational changes or mass redundancies, a social plan negotiated between the employer and the works council may stipulate severance payments for affected employees.
- Voluntary Offer: An employer may voluntarily offer severance pay to an employee to incentivize them to accept a termination agreement (Aufhebungsvertrag) or to avoid potential disputes.
- Statutory Severance Offer (Section 1a KSchG): Under specific conditions, if an employer terminates an employee for urgent operational reasons and explicitly offers severance pay in the termination letter, the employee is entitled to this severance if they do not file a termination protection lawsuit within the three-week deadline. The statutory formula for this specific case is typically 0.5 months' salary per year of service.
When severance is paid, particularly in settlement agreements, the amount is often calculated based on a common formula: 0.5 months' gross salary per year of service. However, this is merely a guideline, and the actual amount can vary significantly depending on factors such as:
- The strength of the employee's case in a potential lawsuit.
- The length of service.
- The employee's age (older employees may receive more).
- The employee's chances of finding new employment.
- The financial situation of the company.
- Negotiation skills and legal representation.
- Provisions in collective agreements or social plans.
Severance payments are generally subject to income tax, although certain tax benefits may apply depending on the amount and the employee's tax situation.
Grounds for Termination With and Without Cause
German law distinguishes between two main types of termination: ordinary termination (ordentliche Kündigung) and extraordinary termination (außerordentliche Kündigung), often referred to as termination with cause or summary dismissal.
Ordinary Termination (Without Cause, but Requires Social Justification under KSchG): This type of termination requires adherence to the applicable notice period. If the Termination Protection Act (KSchG) applies (generally in companies with more than 10 employees and after 6 months of employment), the termination must be "socially justified" (sozial gerechtfertigt). This means the reason for termination must fall into one of three categories:
- Operational Reasons (betriebsbedingte Kündigung): The termination is necessary due to urgent business requirements that prevent the continued employment of the employee in their current role. This could be due to restructuring, closure of a department, or economic difficulties. The employer must demonstrate that there is no alternative employment opportunity within the company and must conduct a "social selection" process among comparable employees to determine who is least affected by the termination, considering factors like length of service, age, maintenance obligations, and severe disability.
- Personal Reasons (personenbedingte Kündigung): The termination is based on reasons related to the employee's person or characteristics that affect their ability to perform their job duties. Examples include long-term illness preventing future work, lack of necessary qualifications or permits, or inability to perform the work due to physical or mental limitations.
- Conduct-Related Reasons (verhaltensbedingte Kündigung): The termination is based on the employee's breach of their contractual obligations or misconduct. This could include repeated unexcused absences, refusal to follow instructions, theft, harassment, or other serious breaches. Generally, a prior written warning (Abmahnung) is required for conduct-related reasons, giving the employee a chance to correct their behavior, unless the misconduct is so severe that a warning is deemed unnecessary.
Extraordinary Termination (With Cause / Summary Dismissal): This type of termination is reserved for severe breaches of contract that make it unreasonable for the employer to continue the employment relationship even until the end of the ordinary notice period. It results in immediate termination without a notice period. The reason must be "important" (wichtiger Grund) and must be objectively verifiable. Examples include serious theft, fraud, violence, severe insubordination, or revealing trade secrets. The employer must terminate the contract within two weeks of becoming aware of the full facts constituting the important reason. A prior warning is usually not required for such severe misconduct.
Procedural Requirements for Lawful Termination
Strict adherence to procedural requirements is critical for a lawful termination in Germany. Failure to follow these steps can render the termination invalid, even if a valid reason exists.
- Written Form: Any termination notice, whether ordinary or extraordinary, must be in writing and signed by the employer or an authorized representative. Verbal or electronic termination notices are invalid.
- Works Council Consultation (if applicable): If a works council (Betriebsrat) exists in the company, the employer must inform and consult the works council before issuing any termination notice (ordinary or extraordinary). The employer must provide the works council with all relevant information regarding the planned termination, including the employee's name, type of termination, and the specific reasons. The works council has a limited time (one week for ordinary termination, three days for extraordinary termination) to provide a written statement. While the employer is not bound by the works council's opinion, failing to consult the works council makes the termination legally invalid.
- Statement of Reasons (for Extraordinary Termination): While not legally required in the termination letter itself for ordinary termination (though advisable, especially if KSchG applies), the employer must provide the employee with the reasons for an extraordinary termination immediately upon request.
- Delivery of the Termination Notice: The termination notice must be effectively delivered to the employee. This typically involves handing it over in person (with a witness) or sending it via registered mail with return receipt to ensure proof of delivery. The notice period starts running from the day the employee receives the letter.
- Two-Week Deadline (for Extraordinary Termination): As mentioned, an extraordinary termination must be issued within two weeks of the employer gaining full knowledge of the facts justifying the immediate dismissal.
Common procedural pitfalls include failing to consult the works council, not adhering to the written form requirement, miscalculating the notice period, or missing the two-week deadline for extraordinary termination.
Employee Protections Against Wrongful Dismissal
German law provides strong protection against unfair dismissal, primarily through the Termination Protection Act (Kündigungsschutzgesetz - KSchG).
Scope of the KSchG: The KSchG generally applies to employees who have been employed for more than six months in companies that regularly employ more than 10 employees (excluding apprentices and considering part-time employees proportionally). If the KSchG applies, an ordinary termination is only valid if it is "socially justified" based on operational, personal, or conduct-related reasons, as detailed above.
Challenging a Dismissal: An employee who believes their termination is invalid (either because the KSchG applies and there is no social justification, or due to procedural errors) can file a termination protection lawsuit (Kündigungsschutzklage) with the Labor Court (Arbeitsgericht). This lawsuit must be filed within three weeks of receiving the written termination notice. Missing this deadline generally means the termination becomes legally effective, regardless of its validity.
In a termination protection lawsuit, the Labor Court reviews the validity of the termination. If the court finds the termination invalid, the employment relationship is deemed to have continued without interruption. Often, these lawsuits are settled with the employer agreeing to pay severance compensation in exchange for the employee agreeing to the termination.
Protection for Specific Groups: Certain employee groups enjoy enhanced protection against termination, meaning their dismissal is either prohibited or requires additional conditions or approvals:
- Pregnant employees and employees on maternity/parental leave.
- Members of the works council.
- Severely disabled employees (requires approval from the Integration Office - Integrationsamt).
- Employees on care leave.
Terminating employees belonging to these protected groups is significantly more difficult and requires strict adherence to specific legal provisions and often external approvals.
